B-206521 L/M, MAR 16, 1982, OFFICE OF GENERAL COUNSEL

B-206521 L/M, MAR 16, 1982, OFFICE OF GENERAL COUNSEL

DIGEST: SURETY IS OBLIGATED TO PAY THE SMALL BUSINESS ADMINISTRATION'S (SBA) SURETY BOND GUARANTEE FEE OF $5 PER THOUSAND OF THE CONTRACT AMOUNT BECAUSE, 12 DAYS BEFORE THE SBA AGREED TO GUARANTEE THE SURETY'S BOND, THE SBA INCREASED THE RATE FROM $2 TO $5 PER THOUSAND. THE SURETY IS DEEMED TO HAVE HAD NOTICE OF THE RATE INCREASE BECAUSE THE SBA PUBLISHED NOTICE OF THE RATE INCREASE IN THE FEDERAL REGISTER 12 DAYS BEFORE THE SBA AGREED TO GUARANTEE THE SURETY'S BOND.

JAMES V. HANSEN, HOUSE OF REPRESENTATIVES:

YOUR LETTER OF FEBRUARY 10, 1982, REQUESTS ADVICE CONCERNING THE AMOUNT YOUR CONSTITUENT, MR. DIXIE LEAVITT, D.B.A. THE LEAVITT GROUP (LEAVITT), IS OBLIGATED TO PAY TO THE SMALL BUSINESS ADMINISTRATION (SBA) IN CONNECTION WITH SBA SURETY BOND GUARANTEE NO. 0800-86809-100 55. SBA INSISTS THAT LEAVITT IS REQUIRED TO PAY AN AMOUNT BASED ON A CHARGE OF $5 PER THOUSAND OF THE CONTRACT AMOUNT. LEAVITT ARGUES THAT IT SHOULD PAY $2 PER THOUSAND SINCE IT WAS NOT AWARE OF THE RATE INCREASE TO $5 PER THOUSAND. WE CONCLUDE, BASED ON WELL-SETTLED LEGAL PRINCIPLES, THAT THE CHARGE BASED ON $5 PER THOUSAND IS PROPER.

THE UNDISPUTED FACTS REVEAL THAT LEAVITT AGREED TO PROVIDE A SURETY BOND FOR HURRICANE SAND & GRAVEL, INC. (HURRICANE), IN CONNECTION WITH A UTAH DEPARTMENT OF TRANSPORTATION PROJECT. LEAVITT'S CHARGE TO HURRICANE WAS BASED ON LEAVITT'S MISTAKEN ASSUMPTION THAT THE SBA'S CHARGE TO LEAVITT WOULD BE $2 PER THOUSAND. FURTHER, HURRICANE'S BID ON THE UTAH PROJECT WAS BASED ON LEAVITT'S APPARENT, FIXED-PRICE CHARGE TO HURRICANE. THUS, LEAVITT SAYS THAT IT CANNOT LOOK TO HURRICANE TO HELP COVER THE UNEXPECTED SBA CHARGE OF $5 PER THOUSAND AND SBA IS REQUIRING LEAVITT TO PAY $2,174.41 MORE THAN LEAVITT EXPECTED WOULD BE DUE AT THE $2 PER THOUSAND RATE.

ON SEPTEMBER 17, 1981, 12 DAYS PRIOR TO THE TIME THAT LEAVITT AND HURRICANE'S AGREEMENT BECAME FINAL, SBA RAISED THE SURETY BOND GUARANTEE FEE TO $5 PER THOUSAND. SBA NOTIFIED ALL SURETIES OF THE INCREASE, CONSTRUCTIVELY BY PUBLICATION IN THE FEDERAL REGISTER ON SEPTEMBER 17, 1981, AND THE SBA DENVER OFFICE PROVIDED ADDITIONAL NOTICE BY SENDING SURETIES A LETTER DATED SEPTEMBER 29, 1981. LEAVITT DID NOT RECEIVE ACTUAL NOTICE OF THE RATE INCREASE UNTIL OCTOBER 2, 1981, WHICH WAS TOO LATE FOR LEAVITT TO INCREASE ITS CHARGE TO HURRICANE. LEAVITT ARGUES THAT IT SHOULD NOT HAVE TO PAY MORE THAN $2 PER THOUSAND SINCE THE GOVERNMENT SHOULD HAVE PROVIDED A FEW DAYS' NOTICE BEFORE THE EFFECTIVE DATE OF THE RATE INCREASE.

LEAVITT APPARENTLY IS UNAWARE OF THE EFFECT OF PUBLICATION BY THE SBA AND OTHER GOVERNMENT AGENCIES OF RULES AND REGULATIONS, LIKE THIS RATE INCREASE, IN THE FEDERAL REGISTER. THE COURTS AND OUR OFFICE HAVE HELD THAT, ALTHOUGH A PERSON OR FIRM MAY HAVE HAD NO ACTUAL KNOWLEDGE OF REGULATIONS PUBLISHED IN THE FEDERAL REGISTER, THE PUBLICATION PLACES THE PERSON OR FIRM ON CONSTRUCTIVE NOTICE. SEE, E.G., WINSTON BROS. COMPANY, ET AL. V. UNITED STATES, 458 F.2D 49, 53 (CT.CL. 1972); DEWITTE TRANSFER AND STORAGE COMPANY, 53 COMP.GEN. 533 (1974), 74-1 CPD 47. SEE ALSO 5 U.S.C. SEC. 552 (1976) AND 44 U.S.C. SEC. 1507 (1976).

ACCORDINGLY, LEAVITT IS DEEMED TO HAVE HAD NOTICE ON SEPTEMBER 17, 1981, THE DATE OF PUBLICATION OF THE FEDERAL REGISTER. WE ARE NOT AWARE OF ANY LEGAL BASIS TO PERMIT LEAVITT TO BE CHARGED LESS THAN THE FEE OF $5 PER THOUSAND, WHICH WAS IN EFFECT AT THE TIME SBA AGREED TO GUARANTEE LEAVITT'S SURETY BOND FOR HURRICANE.